Leave estate to grandchildren – and cut family inheritance tax
PENSIONERS who follow the housing minister’s advice by bequeathing their estate to their grandchildren could also cut their family’s inheritance tax bill, experts say.
Gavin Barwell has urged older people to consider skipping a generation in their will – making it easier for young people to get on the housing ladder.
It would mean inheritance tax is paid just once, rather than twice, by the time an estate has passed down two generations.
Mr Barwell said the measure would help tackle the ‘profound intergenerational unfairness’ in the housing market – and cited his own experience.
Speaking at a Conservative Party conference fringe event, he revealed that his mother has decided to leave her estate to his sons and nephews.
Asked if others should consider following suit, he said: ‘Absolutely.’
Last night, experts pointed out that skipping a generation is already a popular, and legal, tactic used by families to cut their inheritance tax liability. Tax lecturer and chartered accountant Robert Leach said the technique ‘has been used for years’. Meanwhile Danny Cox, from financial firm Hargreaves Lansdown, said: ‘Skipping generations makes a lot of sense with rising student debt and the housing ladder moving out of reach for so many. It also makes tax sense by avoiding the inheritance axe twice on the same money.’
However, Downing Street swiftly distanced itself from Mr Barwell’s suggestion. A spokesman for the Prime Minister said the comments were given in a ‘private’ capacity.
He added: ‘It is not for the Government to dictate to people how to complete their wills.’
Inheritance tax of 40 per cent is payable on estates worth over £325,000. Amounts up to this threshold can be passed on to a spouse tax-free – meaning the surviving partner can pass on £650,000 tax-free.
British families’ inheritance tax bill has almost doubled since 2010, with the Treasury expecting to rake in £4.6billion from the levy this year.
However the threshold will start rising from April, meaning by 2020 everyone will be able to bequeath an extra £175,000 in property wealth.